‘Toothless’ FCA escapes vote of no confidence

The FCA has come under fire over its approach to regulating financial services but escaped a vote of no confidence.

The regulator was branded “blundering” and “weak, toothless and anaemic” by MPs angry over the way FCA has treated businesses and consumers.

MPs were gathered to vote on a motion tabled by Conservative MP for Aberconwy Guto Bebb, which stated “this House believes that the FCA in its current form is not fit for purpose and we have no confidence in its existing structure and procedures”.

The debate covered how the regulator carried out its investigation into firms that sold the failed Connaught Income Series 1 fund, as well as the treatment of businesses missold interest rate swap products by banks.

Labour MP John Mann, who backed the motion, was scathing in his criticism of both the Government and the regulator, warning consumer rights are being “ripped away”.

He said: “The FCA ought to be strengthened, but it would appear that it is being weakened. With its culture reviewed, dissipated and destroyed, it is being neutered.”

He added: “The consumer champions in the FCA have been systematically removed over the past four months, leaving none in place.

“One can only conclude that the rights of the individual, the rights of the entrepreneur and the rights of the consumer are being subsumed to the big brother of the Bank of England and the Treasury.

“This leads to a question: are the Government members here listening to the debate really going to be on the side of big brother doing down the entrepreneur, doing down the individual and doing down the consumer, or will they be on the consumers’ side? Big brother is taking over.”

Bank of England deputy governor Andrew Bailey was announced as the new head of the FCA last week.

Speaking during the same debate, Conservative MP Gary Streeter said: “This interest rate swap misselling scandal is one of the greatest scandals in recent decades, but because it is complicated and because it primarily affects businesses and not consumers, it has received insufficient attention from the Government and from the media.

“At the same time as this has been in play, the Government have been more concerned about the survival of the banking system in its entirety and about getting the nationalised banks ready for re-privatisation as quickly as possible.

“I can understand that, but it is perhaps for those reasons that they have not been robust enough with the FCA, whose oversight of this misselling has been weak, toothless and anaemic from the very beginning. This has been misselling on an industrial scale and we have hardly got to grips with it at all.”

Fellow Conservative MP and Treasury committee member Mark Garnier agreed there is evidence the FCA is “not standing up for the consumers” but argued a vote of no confidence was a step too far.

He said: “Have we perhaps, on occasion, been guilty of what sports commentators do when a poor goalkeeper successfully saves many, many shots, but, when he lets through one crucial goal, is criticised by everybody for not being up to the job?”

Garnier also pointed to the “successes” of the FCA, citing substantial fines levied in relation to the Libor scandal.

In addition, he suggested the Treasury committee could be given a power of veto over the appointment of the next FCA chief executive to ease concerns about Government interference.

And Conservative MP Jacob Rees-Mogg warned: “The motion is really serious. It says that we have no confidence in an arm’s length independent regulator that this House established just three years ago. If we really mean that, we ought to be legislating to create a new one.

“We should not simply pass a motion; we should say that the body has failed, that it will be abolished as of 1 April and that a new one will be created.”

He added: “A vote of no confidence is the nuclear weapon of Parliament. It is something that brings Governments down. If we pass the motion, it ought to lead to fundamental change at the FCA and resignations, but I fear that we are trying to fire this gun before we have loaded it with gunpowder, and that therefore it will misfire.”

Despite the criticism, Treasury economic secretary Harriett Baldwin urged MPs not to support the motion and the vote was not held.

Given that George Osborne has already announced his own vote of no confidence in Martin Wheatley and the Treasury has already initiated its FAMR, one wonders what would happen next if this vote had been held and, as seems highly likely, gone against the FCA. The wheels of change are already turning.

That aside, it hardly seems appropriate to describe the FCA as toothless. The problem is that it uses its teeth to bite all the wrong people whilst failing to take adequate action against the biggest and baddest offenders.

Conservative MP Rees-Mogg said “We should not simply pass a motion; we should say that the body has failed, that it will be abolished as of 1 April and that a new one will be created.”… So you can actually create a new regulator in that time and have a new infrastructure in place?

The machinations of the House of Commons might be in need of explanation. Given the numbers of MPs attending the proposers of the motion would have been likely to have had a majority of 40ish. The question is what would they have done with it As a backbench debate it can issue no commands to the Treasury and when ignored it might make backbenchers look even more impotent.

The purpose of the debate was to demonstrate “the mood of the house” that it did The Treasury and the FCA are now on notice. Libertatem now need to increase the numbers of MPs interested.

I do believe this is the right decision, after all what would a vote of no confidence lead too ?
That is not to say, heads should not roll (at senior level) ? they should, and very publicly too, for far to long they have they been looking the wrong way and un-yielding to change their ways.
I think very strongly, those institutionalized from the FSA/Sants days have feathered a very warm and cosy nest for themselves and their prejudice, has only fed their arrogance, this in turn has grown and manifested itself into other areas such as MAS, FOS and the FSCS, …….. they are not as invincible as they would like to think they are !

The fact that the vote was not held is probably irrelevant in as much that the discussion is out there now and hopefully the subject will remain current in peoples minds.

The real issue is that over 27 years, successive regulators have steadfastly refused to utilise the wealth of experience and practical knowledge which exists out there in the Adviser community.

I refer particularly to all those Advisers (small IFAs) who have retired or semi retired, and have loudly and consistently requested a forum for their advice and opinions to be heard … and listened to … with a serious intent that the regulator should act on those views.

How many times have we seen the Regulator venture a concern, which is then answered with logical and practical solutions from the Adviser community, only for the Regulator to do something entirely different, and fail accordingly.

Quite apart from the damage that the Regulator causes, and the massive expense to the ultimate payer (the public), of which the RDR must surely be a classic example, it is backward not to use the ideas from those within the profession who have the answers.

It is very upsetting to read these comments. There is a very large problem that MP’s just cannot seem to see, that regulation after 20 odd years has failed to protect the consumer.
Nothing will change, even if you did phoenix the regulator. Whilst Banks, major Insurance and Life companies are their main source of information and lobbying, there will be no change as these bodies will always look out for their own needs.
If we look back we can see that the solutions that would have worked, have been blocked, over turned and deflected by those wishing to protect their interests.
The one thing that is needed, the one thing is the time to stand back and not rush through poor outcomes, the mother of all being RDR. The TSC requested a delay but the regulator pushed on regardless, it happens time after time.
Finally, I note that the whole debate was mostly around big business yet again. Yes the consumer was mentioned, but the issues not addressed.

I feel the outcome was right – for now. Like Garry said it is a warning shot that they are ‘on notice’.

Lets hope it works and the regulatory system does what it is meant to do. However with a lack of consumer groups and adviser community represented the public voice is under-represented at all levels. This means we are left with the big corporate and regulatory interests dominating the agenda which does not inspire confidence.

Hence ground hog day is here again as we head towards the next scandal whatever that may be.

Did anyone expect anything else?
Yet again the Gas Works talks to itself with no conclusion and no result. The real motion should have been ‘This House is a monumental waste of space’.
We have an ‘independent’ regulator that is not appreciated by those it regulates and by those that gave it power in the first place. Instead of bleating the legislators should have done something. Either made it responsible and diluted its omnipotence, or given it more power and a freer hand. Just moaning about it and doing nothing secures Parliaments poor reputation. Brussels could do better!

The Actual Practical situation with the FCA is summed up as follows: –
Dec 3 Applied for and paid for variation of permissions, Feb 2 telephoned to ask for an update, not allocated to a ‘case officer’ yet so no update. “When can I get an update?” “Not until allocated.” “When will it be allocated?” “Don’t know, we have 6 MONTHS LEGAllY to provide the service.” UNFIT for purpose quango that needs to be completely re-organised. If this were a Commercial Company, I would give it 4 weeks maximum before it went bust!

I think this was the right call for now as I think this “shot across the bow” will be aimed at the new Chief. I think they are in fact, warning him (in political speak) that they will get rid of the lot of the “old guard” with the next vote of no confidence, if he does not do it when he takes up the post.
In my humble opinion the FCA epitomises the definition an organisation that needed a route and branch clear out and complete overhaul in order to make it fit for purpose.
I think Andrew Bailey is going to earn every penny of his £10k a year salary and company Skoda. I hope he is the right person to bring this much needed change about.